Bajaj Finserv Limited (BAJAJFINSV) Q2 FY23 Earnings Concall Transcript

Bajaj Finserv Limited (NSE:BAJAJFINSV) Q2 FY23 Earnings Concall dated Oct. 25, 2022

Corporate Participants:

S. Sreenivasan — Chief Financial Officer

Tapan Singhel — Chief Executive Officer, Bajaj Allianz General Insurance Co. Ltd

Tarun Chugh — Chief Executive Officer, Bajaj Allianz Life Insurance Co. Ltd

Bharat Kalsi — Chief Financial Officer, Bajaj Allianz Life Insurance Co. Ltd

Ramandeep Singh Sahni — Chief Financial Officer, Bajaj Allianz General Insurance Co. Ltd

Analysts:

Nischint Chawathe — Kotak Securities — Analyst

Nidhesh Jain — Investec — Analyst

Avinash Singh — Emkay Global Financial Services — Analyst

Sanketh Godha — Spark Capital Advisors — Analyst

Prakash Kapadia — Anived Portfolio Managers Pvt. Ltd — Analyst

Bhuvnesh Garg — Investec — Analyst

Anuj Narula — JM Financial Institutional Securities Limited — Analyst

Sameer Bhise — JM Financial Institutional Securities Limited — Analyst

Bharat Shah — ASK Investment Managers — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Bajaj Finserv Limited Q2 FY ’23 Earnings Conference Call, hosted by JM Financial. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Sameer Bhise from JM Financial. Thank you, and over to you, sir.

Sameer Bhise — JM Financial Institutional Securities Limited — Analyst

Thank you, Faizan. Good morning, everyone, and season’s greetings. Welcome to the earnings conference call of Bajaj Finserv Limited for 2Q FY ’23. First of all, I would like to thank the management for giving us the opportunity to host the call. So on the management team of Bajaj Finserv Limited, we have Mr. Sreenivasan, Chief Financial Officer; Mr. Tapan Singhel, CEO, Bajaj Allianz General Insurance; Mr. Tarun Chugh, CEO, Bajaj Allianz Life Insurance; Mr. Ramandeep Sahni, CFO, Bajaj Allianz General Insurance; and Mr. Bharat Kalsi, Chief Financial Officer of Bajaj Allianz Life Insurance Company.

With that, I would like to hand over the call to Mr. Sreenivasan for his remarks and then we can open to Q&A. Over to you, sir. Thank you.

S. Sreenivasan — Chief Financial Officer

Thank you, Sameer. Good morning and Happy Diwali to everybody. I welcome everybody to this conference call to discuss the results of Bajaj Finserv Limited for Q2 of FY ’23. As before, in this call, we will concentrate largely on the consolidated results of BFS along with the results of our insurance operations and our other smaller subsidiaries. Bajaj Finance has already had its call. However, if there are any high-level questions on BFL, we would be glad to take that as well. We’ll not be taking any questions on the status of Allianz’s stake in our insurance company. The status has remained the same as at the end of the previous quarter.

Any statements that may look like forward-looking statements are just estimates and do not constitute an assurance or indication of any future performance result.

Just a remark on Ind AS. The consolidated results, as you are aware, are based on the Indian Accounting Standards or Ind AS. While the insurance companies present their stand-alone results on the basis of Indian GAAP or the IRDA financial statements and regulations. However, for the purpose of consolidation they give us Ind AS-compatible financial statements which are duly reviewed by the auditors.

Coming to the performance for Q2 of this year, the macro headwinds were pretty strong in this quarter. They continued actually, I should say. Inflation continued to be high. The RBI further hiked interest rates. Overall, in H1, they’ve hiked rates by about 190 basis points, and inflation remained fairly persistent. The impact on the economy was mixed overall. I think we saw auto sales — strong increase in auto sales. Credit growth was strong in the period. However, there were reports of a somewhat sluggish rural economy. Overall, we saw that discretionary spending was pretty strong in this quarter, which was generally helpful for us as a business. The General Insurance sector was characterized by intense price competition in the motor segment, while the Life Insurance sector recorded a muted growth of 5% in the individual-rated business. In this environment, we think our companies have continued to do well in line with their chosen strategies.

Let me touch upon each of our major businesses. Let me start with BAGIC first. For the quarter, BAGIC reported a degrowth of 5.6% in the headline number of gross domestic premium income, as against industry growth of 9%. However, as we’ve mentioned before, the tender-driven businesses like crop and government health are basically for bottom line, and last year in Q2 we had written a very large government account in Gujarat which we did not renew this year. And therefore, if you exclude the effect of those, the GDPI growth for the quarter was about 12% and for half year it’s about 15.6%. BAGIC continues its approach to calibrated growth that is seeking to grow in preferred segments, which are private cars, two-wheelers, commercial lines, and retail health, along with commercial lines, while remaining cautious at opportunistic on group health.

To give some more detail, growth in GDPI was attributable to retail and group health, 9% in retail health, 33% in group health, and commercial lines grew very well, 11.4%. We also saw a revival of the travel business. It started in Q1, but I think the strength was more visible in Q2. Overall, in H1 FY ’23, BAGIC had motor growth of 12% with two-wheeler segment growing 23%, the CV segment grew 14%, and the four-wheeler segment grew 8%. The strong growth in commercial lines was aided-siloed [Phonetic] by BAGIC’s very strong bancassurance network and supported by the agency channel. And also BAGIC has its very strong underwriting approach, as well as significant reinsurance capacity for covering large risks. BAGIC continued its strong performance across retail, commercial and industrial risk categories in the commercial lines. Fire and Marine segments continued their growth momentum, while Engineering, Liability lines have also shown reasonable growth, continuing their momentum from the previous quarter. Overall, commercial lines continue do well with growth of 11.4% and 15.3% — 15.3 percentage [Phonetic] for the half year, I should say, as against an industry growth of 9% and 12.6%. Health insurance overall performance was better in Q2 as compared to Q1. Overseas medical or travel insurance continued its momentum, while BAGIC growth in retail health at 8.8% was marginally higher than the market with the private and PSU players growth of 8.7%. Similarly, in group health, BAGIC registered a growth of 33% in Q2 versus industry growth of 16.4%. For the industry overall, retail health growth, including stand-alone, was 17% in Q4 and 14.3% in H1.

On the claims front, the experience in Q2 sequentially improved as compared to Q1 on the back of better selection of business and measures taken to control expenses of management. The loss ratio and combined ratio in Q2 improved by 2.4% and 4.8%, respectively, as compared to Q1 of FY ’23. For Q2 FY ’23, the loss ratio stood at 75.5% as against 77.6% in Q2 FY ’23. And in this, we have also taken a provision of INR34 crores net of reinsurance on the Supreme Court order on Osmanabad Kharif 2020 Crop season. This is our best estimate as we stand here now and we’ll be reviewing that as the case progresses. The matter being sub judice and still under discussion with the government, we would not like to comment anything more on this. The combined ratio for Q2 again came back below 100% at 99.8%. It is a tad higher than last year of 98.5%, but nevertheless below 100%. The higher frequency in motor and health excluding COVID and impact of inflation on costs are expected to remain over the next couple of quarters at least. BAGIC will monitor these developments closely and endeavor to initiate corrective action as needed. In a market which is intensively price competitive, the result we believe displays BAGIC’s commitment to a balanced and profitable growth on the back of strong underwriting.

The profit after tax was INR336 crores as against — in Q2 FY ’23 and INR747 crores in H1 FY ’23. The AUM grew by 8% and has reached INR26,500 crores as of 30 September 2022. Apart from the impact of provision for the Osmanabad Crop claim, BAGIC also had lower one-time gain of INR81 crores from the sale of investments in Q2 of FY ’23. These are of a one-time nature and therefore, we think over the subsequent quarters this — the impact of this will even out. In summary, it was a quarter with strong external headwinds and BAGIC has chosen to hold its own with a good combined ratio and reasonably good profit.

Let me move to life insurance next. Overall, the life insurance industry saw muted growth in Q2 after a strong Q1. During the quarter, while a few private players saw slowdown in their growth as compared to the previous year, BALIC continued on its month-on-month growth trajectory and reported an industry-beating individual rated premium growth of 32%. This is compared to just 5% of the industry and 7% for private players. Similarly in H1 of FY ’23, BALIC’s individual rated premium grew 51% as against the industry growth of 19% and private players growth of 21%. In fact, in H1 of FY ’22 BALIC was the second-fast H1 ’23 — BALIC was the second-fastest growing life insurer among the top 10 players on individual rated new business basis. And BALIC’s three-year CAGR of 36% on an IRNB basis on H1 FY ’23 is the highest in the industry. BALIC maintained its rank while improving its market share of IRNB from 6.2% to 7.7% amongst private players in H1 FY ’23. The total number of policies for BALIC also grew by 17% to 1.35 lakhs in Q2 FY ’23 and in H1, overall growth has been 38% as it ended at about 2.57 lakh policies.

On the product front, the Assured Wealth Goal, is a non-par savings product, has been well received in the market. It contributed to 16% of BALIC’s product mix in Q2. During the quarter, BALIC also relaunched its analytics-based term product. Going forward, it is the intention of BALIC to slowly increase the share of individual term business, but to the segments that BALIC feels is reasonable in terms of risk.

In terms of product mix, par was 18% in Q2, non-par savings 35%, term 3%, annuity 9%, and ULIP 35%. I must reiterate here that BALIC a few years ago had taken up a stance of maintaining balance, balance in distribution, balance in product, and balance between growth and profitability. And I’m glad to say that the balanced product mix continues to be maintained with ULIP being just 35%. Most of the lines have shown solid growth in absolute terms as well and the business mix changes reflect difference in growth, and hence, are not something that we are concerned about in the short run.

During the quarter, growth was driven by all our main channels: Agency, Institutional Business and BALIC Direct, the three main arms of distribution, with Agency growing at 17%, Institutional Business at 47%, and BALIC Direct growing at 30%. Another point I would like to highlight here is the strong Y-o-Y increase in persistency across vintages, especially in the later buckets, where the 49-month persistency increased by 4% to 63% and the 61st month increased by 5% to 50%. The increase in persistency has delivered a strong growth of 21% in terms of renewal premium in Q2. The new business value, net of expense overruns, the key metric of profitability, increased by 40% from INR136 crore in Q2 of FY ’22 to INR190 crore in Q2 of FY ’23. And for the half year, it was INR325 crore as against INR161 crore for the six months ended 30 September 2021 with a growth of over 100%. BALIC’s PAT, profit after tax, also grew 53% to INR159 crores, as against INR104 crores, because last year we did have the impact of COVID claims. Overall, a very strong quarter for BALIC.

Finally, both insurance companies are financially among the most solvent, BALIC at 532% and BAGIC with 362% and BAGIC, in particular, has generated capital during the quarter. All our businesses have further augmented their digital capabilities, along with greater digital acceptance by customers should, we hope, help create the foundation to deliver strong performance in the second half of FY ’23. The details of our digital penetration is given in our investor deck, which has been uploaded on our website a few days ago. Both BAGIC and BALIC have seen an increase in the utilization of the digital properties by customers and intermediaries.

Let me move to our lending business, BFL and BHFL. BFL has already had its call. However, we’ll only broadly touch upon BFL results. Both Q2 and the first half of FY ’23 were excellent for BFL as the company delivered on all its long-term financial guidance metrics: AUM, profit growth, return on assets, return on equity, as well as gross and net NPA. Continuing on its growth story, BFL acquired 26 lakh new customers in Q2, 53 lakh new customers in H1. Building on this customer franchise, the number of new loans booked enabled — increased to 67.6 lakh as against 63.3 lakh in Q2 of last year. Its diversified business model has enabled to record a strong AUM growth, as seen from the total AUM at INR2,18,366 crore as against INR1,66,937 crore on September 30, ’21. It continues to maintain — BFL on a consolidated basis continues to maintain INR1,000 crore management overlay against loan losses. The gross and net NPA continued to be well within the target range, 1.17% gross NPA and 0.44% net NPA. Overall, 88% higher PATs on a consolidated basis by BFL at INR2,781 crores, represents a very strong result for us. The capital adequacy ratio also continues to be strong for BFL at 25.13%.

BHFL, the 100% mortgage subsidiary of BFL, continues to do well, AUM grew 42% in Q2. The profit after tax grew 84% to INR306 crores as against INR166 crore in Q2 of FY ’22. The capital adequacy ratio stood at 25 — 24.58% and the gross and net NPA are very low at 0.24% and 0.11%, respectively. In summary, a very strong quarter for both BFL and BHFL. Consequently, the BFL consolidated results reflected an all-time high quarterly profit as well.

Just to give a small update on our newer companies, we have put up a couple of slides in Q1 in our investor deck as well, Bajaj MARKETS or Bajaj Finserv Direct and Bajaj Finserv Health. During Q2 FY ’23, Bajaj MARKETS attracted about 80 lakh consumers in its digital platform, of which 2 lakh became customers as against 64 lakh and 1.5 lakh customers in Q1. In Bajaj MARKETS, lending unsecured and secured, along with BFL and partnership disbursement for the quarter stood at INR1,052 crores as against INR875 crores in Q1 FY ’23. It sourced 61,974 cards as against 56,246 credit cards in Q1 of FY ’23 and INR83 crores of FDs as against INR41 crores in the previous quarter. As of Q2 FY ’23, Bajaj Finserv Health had cumulatively registered 79 lakh users with monthly active users reaching 6.35 lakh during the quarter. Total base of paying users for EBS [Phonetic] stood at 7.95 lakh, while the total number of transactions reached a high of 7.09 lakhs.

Just to summarize the overall results, consolidated total income, 16% increase at INR20,803 crores. Consolidated profit after tax, 39% increase at INR1,557 crores. For the half year, consolidated total income up 15% at INR36,692 crores and consolidated profit after tax, 47% higher at INR2,866 crore. Under the Ind AS, the insurance subsidiaries have chosen to hold a large part of the equity securities portfolio at fair value through profit and loss account. Therefore, the unrealized mark-to-market gains or losses on investments included in consolidated profit were a loss of INR21 crores in Q2 of FY ’23 versus a gain of INR105 crore for Q2 of FY ’22. Similar MTM impact were a loss of INR304 crore for H1 of FY ’23 versus a gain of INR130 crores for H1 of FY ’22. If one were to exclude the volatile impact of MTM losses and gains, the core profit after tax excluding these would have increased by 55% and 74%, respectively, in Q2 and H1 of FY ’23. Overall, a very satisfactory result for BFS in H1.

And with this, I will now invite questions from the investors. Thank you.

Questions and Answers:

 

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Bharat Shah from ASK Investment Managers. Please go ahead.

Bharat Shah — ASK Investment Managers — Analyst

Yeah. Hi. Thank you. Good morning to everybody, and wish all of you a very, very Shubh Diwali. When I look at the performance numbers over a period of time, it’s very, very — now clear. As far as life insurance business is concerned, there is a very solid progress that has been made, and along with the growth, qualitatively important parameters are being attained there. So, it is reassuring to see a solid progress over the period of time in BALIC. In BAGIC, in sync with the control of the risk and keeping in mind the other parameters, there has been a very measured performance, like in sync with the past.

When I look at the various parameters in which the progress has been attained, and if you have to look at a period of three to five years ahead, what are the strategic three or four priorities for each of the business? Or what are the strategic measurement indicators that the business leaders would like to see for themselves being attained over three to four years’ time? This could be parameters like growth, it could also be a qualitative measurement of the growth like balancing that Sreeni was earlier mentioning, it could be capital efficiency measurement such as return on capital employed or return on equity in the BAGIC business, or return on embedded value in BALIC business. So what are three, four key parameters that the business leaders in both these areas would like to see being attained over next three to five years’ time?

S. Sreenivasan — Chief Financial Officer

I would hand over to — first to Tapan and then Tarun to — who are in the call because being a question of strategic natures, let the CEOs answer this. And thereafter I’ll give an overview from BFS’s perspective. Tapan?

Tapan Singhel — Chief Executive Officer, Bajaj Allianz General Insurance Co. Ltd

Yes, thank you, Sreeni, and thank you Bharat bhai for a very good question. See, if you look at our customer size, we would be close to 14 crores or so now, which means that if I look at Indian household at about 1, let’s say, we divide that by 4, you roughly would get about 33 crores, 34-odd crores household. So, currently, if you look at — if you divide it on a very like rudimentary basis, not a very exact parameter, but around 1 in 3.4 households, we would be present currently as Bajaj Insurance Company. Now, one of our ambitions is that, can we be present in all households of India. So can we be present in every household of India? That is a clarity of thought and vision that we have, for which we are looking at how do we reach out to all Gram Panchayats, how can we — even in states — IRDAI [Phonetic] given us states like — they have given us UP, they have given us Jammu and Kashmir, Ladakh, all the states which have been given to us can we increase insurance penetration? So, first point is the increase of insurance penetration, which is very, very clearly in the top of our mind.

The second, if you look at Bharat bhai is that, we always maintain that if you do business in a sensible manner, which means that you don’t burn capital but you are able to grow business and acquire customers, we are able to serve them well and we are able to be true to what we have committed to customers in terms of delivery to customers and that’s how you build a long-term brand. So that we shall do, the second point is not let go of our act of seeing that we are able to do good business and serve the customer very well. Like, if you’ve seen in — the regulators have said, if you look at the grievance ratio, you will always find that Bajaj Allianz has been the least grievance ratio consistently over all quarters together, in fact, for close to a decade now, if I may say so. So that is something which we’ll be obsessed with the customer service, writing good business and serving the customer very well, so that we’re able to maintain the least grievance ratio and remove friction.

The third point is that, we shall be using technology to enhance customer experience to a different level. Insurance should mean for customers a lot of comfort that in times of claims they do not worry about anything, there should be immediate payment to the customer, there should not be any hassle, completely friction-free experience for the customers. So to answer this question, three points — Bharat Bhai, these are the three points from my side, in which we are very clearly obsessed in taking this home. There are many more points, but since you asked me for three I said — I’ll just stick on to three. Thank you, Bharat bhai. Over to you, Sreeni.

S. Sreenivasan — Chief Financial Officer

Tarun? Over to you. Tarun, on the line?

Operator

Tarun sir, we can’t hear your audio, please unmute your line from your side.

Tarun Chugh — Chief Executive Officer, Bajaj Allianz Life Insurance Co. Ltd

Am I audible now?

S. Sreenivasan — Chief Financial Officer

Yeah, you are.

Tarun Chugh — Chief Executive Officer, Bajaj Allianz Life Insurance Co. Ltd

Bharat, great question as always. I’ll keep it crisp to the measures straightaway. The three critical measures for me are: market share of the overall business of the private sector; we’re currently at about 7%, we’ve doubled from where we were earlier about four, five years back. And within this, the highest growth in total NOPs and customers added per year, usually, there are some customers always going out. So, the total accretive NOPs becomes a very critical piece.

Another basic piece for us from a risk perspective is diversified distribution and diversified products. I would not like any distributor dependence more than 25%, unlike the large companies who are dependent on usually one bank or one and a half banks. And even from a product perspective, I wouldn’t want any one product to be more than 15% to 17% of our business. There could be categories of product which at some point in time could be higher, could be lower, but a product should not be more than 15% to 17%.

The last is on profitability and RoEV. And now that the EV is going to be showcased to investors regularly. An RoEV measure is something we need to work on and get it better than where we are today, I think becomes very critical. In terms of the most important qualitative aspect would be making it easy, our products and our processes, as easy as possible and taking all decisions for the Company, assuming there was a customer sitting in the room while we take a decision. Broadly these.

Bharat Shah — ASK Investment Managers — Analyst

Yeah. Thank you. A little bit [Speech Overlap]

S. Sreenivasan — Chief Financial Officer

Bharat, before your follow-up question, from a capital allocation perspective in BALIC, if you know a few years ago, we had almost 800% solvency, it has now come down to below 600%. We have invested quite a lot of that into either value for the customer in terms of entering products with higher business, new business trade or guarantees like non-par savings have done exceptionally well for us in terms of profitability and we have also started distributing dividends back to BFS, which we are reinvesting into some of our newer entities.

In terms of BAGIC ROE, relative to market continues to be very strong. We are still in the 16%, 17% range. In a good year we could even touch 20%. Our industry as a whole has large underwriting losses and we will continue to be looking at that. They are now generating capital just like BFL. And, of course, BFL, as you know, has been generating capital. With the subsidiarization of the housing finance company, BFL’s book has become predominantly short-tail. So, overall, I think as a Group, our capital position has improved significantly.

In terms of our startups like the Bajaj Finserv MARKETS and Bajaj Finserv Health, our first goal is to reach a high level of transactions per customer per month. I think the first milestone that — I can’t say the timeframe as of now, but say over the next three to four years, if we can touch a couple of million transacting customers, it will be very satisfactory. We can say that we have reached the first level of critical mass.

In terms of our mutual fund, we will be launching — hope to launch, with SEBI approval, the final approvals are awaited. Hopefully by Q4 of this year, a first set of products. And there we would like to play digital-first mutual fund, not on the ETF, the low income, the very low-cost passive side, nor in the highly expense-heavy aggregated side, but somewhere in the middle tier, focusing more on Tier 3, Tier 2 towns, and building a digital-first distribution. And we try to create a differentiated space there. It is a game for us where we get more customers, we will measure it more by the number of customers we acquire, because AUM will take some time to develop. Broadly this is an overview of where we stand in BFS.

Bharat Shah — ASK Investment Managers — Analyst

Sure. Thank you. Just one question in — follow-up to what was mentioned earlier. So, for example, can we have a little more concrete definition of where we want to be, say, in BALIC? For example, in terms of the growth parameter, given the large size of opportunity that is before us, likely growth rate for, say, the VNB over a period of three to five years’ time, and the efficiency parameter, where likely ambition to touch return on embedded valuator, kind of a — some more concrete measurement of where we want to be.

Equally, in BAGIC, the risk control has always been at the forefront. When the return on capital employed or return on equity, which is 16%, 17% today, can we have a kind of a combination wherein — where the growth rates are somewhat muted, it will be compensated by superior return on equity, and where return on equity is at a good level, at a healthy level, may not be at an exceptional level, like 17%, 18%, then whether that can be compensated by much superior growth rate. In other words, some kind of a trade-off between the two, where we create a healthy combination of superior growth, superior quality and capital efficiency for BAGIC. Can we have some kind of concrete kind of — I know it — in a way it is slightly trying to be presumptuous, but in case if there is any thought on that, I would like to hear that.

S. Sreenivasan — Chief Financial Officer

Can I take that, Tapan and Tarun first?

Tarun Chugh — Chief Executive Officer, Bajaj Allianz Life Insurance Co. Ltd

Yeah, go ahead.

S. Sreenivasan — Chief Financial Officer

Yeah, I think on — I’ll start with BAGIC first. As you know, it’s a very volatile industry with catastrophic claims and significant court decisions on motor third-party and things like that. So I think we can only aspirationally give a sort of range we would be. We have never been below 15% for a number of years. So clearly, we would like to be at least about 15% to 20%. In a good year we would like to clock 20% and in a bad year, possibly closer to 15%, 16%. Having said that, I think the bigger question for you was, are we giving up growth to remain at this level? You see, in GWP as a measure can be quite misleading in general insurance. You can write a lot of fronting business or tender-driven business and the GWP can grow. So it’s really the measure is how we are growing our retail and commercial lines altogether, along with our corporate clients where we retain reasonably well. So we do try to report the numbers excluding the tender-driven business as well. In that sense, I think we would like to grow, obviously, because — I mean, general insurance clearly has a straight correlation with the capital formation and the sale of automobiles, which has been a bit weak over the last few years. As they pick up, we would like to grow above the nominal GDP by about 2.5% to 5%. And in the case of Life, I would put that number closer to between 5% and 10% given that we have a relatively lower base as compared to the top three companies.

Now, in terms of NBV growth, we do not place too much importance on margins in Life Insurance because there are businesses with low margins but offering great potential for high volumes. So net-net, I think NBV captures both the volume and the margins. And that is where we would like to grow faster than the growth in the top line.

Tapan, Tarun, would like to add something to it?

Tapan Singhel — Chief Executive Officer, Bajaj Allianz General Insurance Co. Ltd

No, Sreeni, I think you’ve summed it up very well from my side.

S. Sreenivasan — Chief Financial Officer

Tarun?

Tarun Chugh — Chief Executive Officer, Bajaj Allianz Life Insurance Co. Ltd

I think absolutely fine. We’ve put together everything in one go.

S. Sreenivasan — Chief Financial Officer

Yeah. Okay.

Bharat Shah — ASK Investment Managers — Analyst

Thank you.

Operator

Thank you. The next question is from the line of Nischint Chawathe from Kotak. Please go ahead.

Nischint Chawathe — Kotak Securities — Analyst

Yeah, hi. Good afternoon and Happy Diwali. Just two questions from my side and one was on Life. What kind of a growth trajectory do you really see from here on? Obviously, done very well in the first half and I believe there will be some base effect catch-up also happening towards the end of the year. And the fact that I think some of the banks are kind of focusing a little bit more on deposit gathering here on, kind of sale of bancassurance products. So in the backdrop of all these things, what kind of a growth trajectory do we see over the next 12 to 18 months?

S. Sreenivasan — Chief Financial Officer

Tarun?

Tarun Chugh — Chief Executive Officer, Bajaj Allianz Life Insurance Co. Ltd

Yeah. So you’re right, you are very right and very clearly we had expressed that the growth that we had in the first quarter was overwhelming for the entire sector itself and for BALIC as well because of the COVID impact till about June. Since July, if you see, the numbers have started getting to be more reasonable in terms of growth, but for us it has been still quite good in terms of growing versus the sector. So the base effect, yes, will play out in the second half. The second half last year was quite strong, and you should expect that maybe growth will come to more reasonable levels.

As far as BALIC is concerned, we don’t make a forward-looking statement — we don’t give forward-looking statements. But you should expect near double of industry growth rates if you think of the private sector as an industry and I think that is a statement I like to maintain currently.

Nischint Chawathe — Kotak Securities — Analyst

And to what extent are you seeing shift of banks towards deposit gathering?

Tarun Chugh — Chief Executive Officer, Bajaj Allianz Life Insurance Co. Ltd

So, yeah, it’s again a very good point you raised there. So it is going to be higher, and the fact that interest rates are moving up, banks are going to move towards more FDs — customers are going to move towards FDs. This is again something we had mentioned very clearly that this is a trend we were expecting in the second half of this year. The interesting bit is that, for us, which is why in the earlier response I did make sure that we don’t — I did very clearly say that we don’t want dependency on A product and more so some product segment, for sure. Given that we are highly diversified in terms of our products, we would be able to maintain a good growth rate by moving from one to the other. The — in the future, what will — win in the market is ability to be able to spot niches, both in customer segments and customer needs, and that is what is going to decide winning products and a not-so-strong product.

Nischint Chawathe — Kotak Securities — Analyst

Sure. The other question is on the digital term product. So you just launched across digital platforms or is it kind of done selectively and kind of what gives you comfort on the fact that you won’t be taking the risk of adverse selection?

Tarun Chugh — Chief Executive Officer, Bajaj Allianz Life Insurance Co. Ltd

No, I think that’s brilliant point, I’m happy that you look at the business in so much depth. We have taken a very structured look at our term strategy and last year, very clearly, we had struggled in this and so had the entire sector. Since then, we’ve had — we’ve taken a few calls. We’ve kept core retention on our books. And what we very simply told all our partners is that, the customers we shall be onboarding will be based on our profile and analytical models. I think we have probably one of the best models in the market. I would believe so. And what we’ve done is, we’ve clearly segmented them into four segments, or kind of customers we’d want. And in the better segments, we’ve seen a significant shift now. The market itself is giving us that benefit where we are able to give easier processes, because we are now getting to give easier processes to customers with — in a better segment, while if somebody is not in a great segment, from a risk perspective, our checks have only just gotten intensified. As a result, we have seen a significant shift now in a positive fashion to term business. You will see more and more of this as we move ahead.

Nischint Chawathe — Kotak Securities — Analyst

Right. Just moving onto the non-life side, if you can comment a little bit on the health side. Two questions. One is, a, your growth has picked up quite well this quarter on the retail side. And the other thing is on the retail claims ratio, I think there seems to be some drive. So is that something which is concerning, is the inflation on the health side a little worrying? And do you really see on the health side whether you’ve really been turning?

Tapan Singhel — Chief Executive Officer, Bajaj Allianz General Insurance Co. Ltd

We had mentioned this in the past also, in the COVID time there was a lot of uncertainty. In that time we had slowed down the growth for health. Now, with the uncertainty is behind us, now I think the environment is more stable. So we understand that — what the loss ratio would be, what the movement will be. So we are picking up health again. I think that is what it was, which I had mentioned also earlier because when you’re — uncertain times, you are not very sure as to how the loss ratio will move, what can go wrong in that. So it’s better to be cautious, and as things settle down, again you start picking up growth. So that is why you see that growth happening and you also see the loss ratio come down a bit now.

Operator

This is the operator. We’ll take the next question from the line of Nidhesh Jain from Investec. Please go ahead.

Nidhesh Jain — Investec — Analyst

Thanks for the opportunity. Sir, firstly on the Life Insurance, can you share the breakup of operational balance of INR87 crore that we have witnessed, how much is coming from mortality, persistency and expenses?

S. Sreenivasan — Chief Financial Officer

Bharat?

Bharat Kalsi — Chief Financial Officer, Bajaj Allianz Life Insurance Co. Ltd

Yeah. I’ll take that question. Nidhesh, thank you. And Happy Diwali, first of all. So most of the INR87 crore operating, wherein the number is coming from our mortality experience and that too from the group line of business. So in the retail also it is positive because last time we were able to price our group product offering better. That’s where it is coming up. A small marginal hit coming from the persistency, or the lapses update and there is obviously the actual tax benefit, which is whatever was planned versus actual tax paid. Those are the things, but 70%, 80% is on account of mortality benefit out of this INR87 crore.

Nidhesh Jain — Investec — Analyst

Sure, sure. And secondly, what percentage of business is coming from Axis Bank for us in this quarter?

Bharat Kalsi — Chief Financial Officer, Bajaj Allianz Life Insurance Co. Ltd

The H1 number is around 25% of our business is coming from Axis Bank.

Nidhesh Jain — Investec — Analyst

Sure. Thanks, Bharat, and Happy Diwali to you. Secondly, on Bajaj General Insurance, how should we see the competitive intensity in the motor OD segment playing out in the coming future, what are our thoughts there?

Tapan Singhel — Chief Executive Officer, Bajaj Allianz General Insurance Co. Ltd

That will remain more intense. In fact, if you look at it, when you have a new player enter the market, I think they normally go for the motor business, because that is easier to acquire and that is what all players have done till now, if you look at it from that perspective. And if I look at the way the regulator is planning things out, he is making regulations pretty easy, looking for more players to come to the market, rightfully so, because in India we still have very less players. There should be at least 300, 400 players in the Indian market. Now with that happening, I don’t see the pressure on motor easing out in the near future.

Nidhesh Jain — Investec — Analyst

Sure, sure. And lastly on the retail health, what is our strategy given that all the multi-line insurance players have struggled in scaling retail health business, how do we plan to scale that business in future and what give us confidence that we will be able to become a meaningful player in that segment?

Tapan Singhel — Chief Executive Officer, Bajaj Allianz General Insurance Co. Ltd

We are already a meaningful player. I don’t think we are a small player. The issue is because we look at growth rate, and that is how we understand how it moves. Now the statement that multi-line players have struggled is not so. I think the issue is that, health SAHI companies had the arbitrage of distribution. They could pick up any agent, while the multi-line players had to go through the process of first acquire a fresh agent, train the agent, get examination passed, then — it takes more time when you have this. So that is one reason why the building of distribution takes more time in multi-line compared to a SAHI company. But if you look at even the SAHI companies also, after certain growth, they also moderate out in terms of growth which would be happening. So the first point is that, my belief is all companies would focus on these two, three products which is motor, health, and if we look at crop, predominantly the industry these three products constitute the major chunk of business, that would go up to close to 80%, 90% business. So you can’t be out of any business. So as a strategy, I think in all three businesses, we would be a significant player even going forward.

Now, having said that, in terms of retail, as I mentioned in my — just my previous communication, when COVID was there and uncertain times in terms of how health could be playing out, we had gone slow. Now, with that behind us, and it’s more stable to understand how things are moving, we will also be pushing our health growth going forward, which is there. So that will be a strategy which we will be there.

Nidhesh Jain — Investec — Analyst

Sure, sir. So we will be investing in our agency network there? From a distribution point of view, how do we strategize to gain share there?

Tapan Singhel — Chief Executive Officer, Bajaj Allianz General Insurance Co. Ltd

So if you look at our distribution network, we are into all distribution networks, the predominant player. If you look at, be it bancassurance, we would be the leading distribution player, be it agents, we would be one of the leading in terms of our — our agents are there, if you look at the brokers or in terms of web sales. So we will be into all distribution. So we would use all distributions to acquire the customers the way we’d want to so that we serve them well. So I don’t think that we try and differentiate or try and push one. We push all distribution at the same time in terms of getting customers, especially in the lines of business like I mentioned to you, the motor and health, because they would be relevant for all distribution networks to that [Phonetic].

Nidhesh Jain — Investec — Analyst

Sure, sure. That’s it from my side. Thank you.

Operator

Thank you. The next question is from the line of Avinash Singh from Emkay Global Financial Services. Please go ahead.

Avinash Singh — Emkay Global Financial Services — Analyst

Yeah, hi. Good afternoon. A very Happy Diwali. So first, a couple of questions on Life Insurance. So firstly, if we were to assume that the current exposure draft on expense of management and commissions were to be accepted as it is, what kind of impact do you see on your overall sort of a business, I mean, maybe by the line of business or the overall company? So, I mean, how do you see the impact if this exposure draft need to be adopted as it is?

And the second question is on that EV investment variance. I would assume a large part of it would have been coming from your own shareholders fund, and FM Group Fund Management. Am I right? These are my two questions.

Tarun Chugh — Chief Executive Officer, Bajaj Allianz Life Insurance Co. Ltd

I’ll answer the first one. The second was a little not so audible. Would you want to ask the second question again, so that I’m clearer?

Avinash Singh — Emkay Global Financial Services — Analyst

Yeah. So second question is that, there is kind of base [Phonetic] material 6% negative impact in forms of investment or economic variances in your embedded value, WACC. I would assume a large part of it would be because of the yield movement. So is it largely concentrated, I mean, on the mark-to-market hit in your own shareholders fund investments or, I mean, if you can just sort of break it up that investment variance part between shareholder investments and on the policyholder impact? Thank you.

Tarun Chugh — Chief Executive Officer, Bajaj Allianz Life Insurance Co. Ltd

Sure. I’ll let Bharat answer the second one and then I’ll get to the first one. Bharat, do you want to take the second question?

Bharat Kalsi — Chief Financial Officer, Bajaj Allianz Life Insurance Co. Ltd

Yeah. Thank you. Thank you, Tarun. Thank you. So if you look at the overall investment variance, out of it shareholder fund is roughly one-third of it. Sorry? Yeah. So one-third is around the shareholder fund, but the balance is coming from the policyholder fund. This is just a mark-to-market, which has to happen. And so, it is across line, but it is at — non-par saving is also one part this year 10% of that. And ULIP also — because what happens when you do ULIP, the future earnings will also come down [Indecipherable] base effect has come down, so that also [Technical Issues]. So those are all the numbers but shareholder alone is one-third.

Avinash Singh — Emkay Global Financial Services — Analyst

Okay, okay. Thank you.

Tarun Chugh — Chief Executive Officer, Bajaj Allianz Life Insurance Co. Ltd

Coming back to the first one, there’s a lot of noise. Thank you. Thank you so much for muting. Yeah. So the question on the exposure draft on the EoM Commission, I think it’s a very welcome move by the authority. It is clearly going to help us in driving insurance penetration, plus price our products more appropriately, and it will help in easing the entire way we kind of do business. This makes life easy for us. So it will only just increase the funnel of business that’s coming in, and we welcome this. As we’ve always been focused on NBV, our net new business value, that will remain a target for us as well. So in terms of pressures from the market, we will always be focused on the bottom line as well.

Avinash Singh — Emkay Global Financial Services — Analyst

Okay. Okay. And, I mean, from the capping perspective, are you sort of currently within those caps? I mean, like you know that [Speech Overlap]

S. Sreenivasan — Chief Financial Officer

[Speech Overlap] within those caps. Yes.

Tarun Chugh — Chief Executive Officer, Bajaj Allianz Life Insurance Co. Ltd

Yeah, yeah. We are very well comfortably within the caps.

Avinash Singh — Emkay Global Financial Services — Analyst

Okay, okay. Very clear. Thank you. One quick question on General Insurance. I mean, motor OD part, of course, you discussed the competitive environment on, but what is holding in terms of motor TP is concerned, because the growth in this quarter seems very, very muted despite whatever price hike that has come effective from June? So that is also coming. Like in this quarter, motor TP growth is just like 2% or something. So, I mean, what sort of a development are you — whether it’s market development or your own strategy that is playing across that motor TP, if you can clarify?

Tapan Singhel — Chief Executive Officer, Bajaj Allianz General Insurance Co. Ltd

Yeah. If you look at — motor comes together, OD and TP, is a segment of — if you look at writing more older businesses, then the TP growth looks higher. If you look at more newer business, then the TP looks a bit muted. So if you — again, when you heard Sreeni in his opening remarks, the sale of motor vehicle has been better and from that perspective, I think the newer vehicles are more into the books and that is why if you look at motor TP comes down a bit. So the mix of TP and OD would change for two, three reasons. One is commercial vehicles, if you write more, you will have more TP, or if you are writing older book, you will have more TP. So it’s a question of mix, it’s not a question of strategy in which we have lowered that.

Avinash Singh — Emkay Global Financial Services — Analyst

Okay, very good. Thank you.

Operator

Thank you. The next question is from the line of Sanketh Godha from Spark Capital. Please go ahead.

Sanketh Godha — Spark Capital Advisors — Analyst

Thank you for the opportunity. Sir, my first question is on Bajaj Life. So the observation in the quarter is that, the annuity business has been flat year-on-year for the quarter, but when we look at the annuity business for the other players, which have come out with the results, it has been very strong. So it seems that we have lost market share to some extent in the annuity business to the larger players. Is it because the larger players have now launched deferred regular premium paying annuity plan which was largely your domain to start with? Sir, so to understand the competitive dynamics there — on that one, and similar observation we’ve seen in the group protection business also, because our growth of 5% is a little muted while it has been strong for the other players who have come out with their results. Sir, just wanted to understand whether the pricing dynamics or something which has led to a bit of slower growth compared to the larger players?

Tapan Singhel — Chief Executive Officer, Bajaj Allianz General Insurance Co. Ltd

No, good questions on this. On the deferred annuity, see, we were the market leaders, we are the first one to come up with this, and we took a conscious call, we were a little apprehensive on the EoM guidelines coming in. And EoM availabilities on deferred annuity products was not being favorably reflected. And we want to be sure. Now that they have surety, we’ll be back in the deferred annuity business, where we belong because we were the market leaders in this and that’s why you currently see a degrowth. So it’s just a matter of time that we get right back.

In the case of group products, the micro finance side, which — MFI side is a very significant part of our business. And Q2 is when this has actually not much grown and there is just about a 5% growth that we saw, if I look at quarter-to-quarter. And our partners also haven’t really grown much on the banks, at least portfolios that we are writing. It’s a very specific situation at this point in time and I would not read much into that.

Sanketh Godha — Spark Capital Advisors — Analyst

Got it. Got it. And last one on Bajaj Life. Sir, if you look at the quarter growth, we have grown individual premium at 32%. But if I back calculate Axis Bank, you should have grown 24%-odd. So just wanted to understand how sustainable this kind of a trajectory in Axis Bank is possible? And maybe a little broader picture, what is our counter market share in Axis? How many people they have deployed? And what gives us the confidence that this channel can sustain a decent — because it clearly has outgrown other channels for us? So, sir, just wanted to understand more details the Axis Bank [Indecipherable]?

Tarun Chugh — Chief Executive Officer, Bajaj Allianz Life Insurance Co. Ltd

Yeah, again, thanks. It’s a very — it’s a question I was expecting anyways. So just to be specific, we are 29% of Axis’ business. Yes, we’ve had been investing in the relationship now for a couple of years. And because of that, the base effect is now coming into play. Last year, we just got entry into branch banking, and that has, of course, taken some time to play out last year, but this year it is a full-blown benefit that we’re getting. Our share last year was around 16% to 19%, depending on the quarter you’d see, but now it is 29%. So that benefit we have received.

Now, the point is a very relevant one that it has been one of the predominant base corrections in the entire top line. As a result, there is significant growth that is showing up in the overall top line for the Company. But remember I mentioned upfront that we are very committed to, not depending on one bank for distribution, although I’m myself quite excited with the way Axis is now structured for growth. The acquisition and growth on CASA, that does bring in more likelihood of growing that business a lot more. I would expect our market share within Axis to remain in this ballpark now. And now it is our turn to assist the bank in growing the overall pie for itself. And I think it’s a fantastic franchise. So we’ll gain as much. But having said that, our dependence will not be on one bank. We’ve had various partnerships come alive last quarter; DBS, City Union Bank, Tamil Nadu Mercantile Bank. So now we have about 22 banks with us, and while these are smaller, our investments in agency and proprietary sales and maximizing our relationships with other banks will also keep in tandem and lead in growth as well.

Sanketh Godha — Spark Capital Advisors — Analyst

Got it, sir. And a couple of questions on General Insurance. Sir, in General Insurance, in motor OD, we have seen a very sharp improvement in the loss ratio from 82% in first quarter to 69%, and honestly, in second quarter, we had maybe Bangalore floods and all those things. So against the counter — against the anticipation it has improved. Sir, just wanted to understand what led to that improvement, whether we have taken a price correction or something which has led to that improvement in the loss ratio in motor OD segment?

And the second question with respect to motor again is that, we see two-wheeler growth at 24 percentage [Phonetic] year-on-year, which means that we clearly have grown at a rate better than the industry average. So market share gain seems to be happening in two-wheeler segment. So, sir, if you can give a little more explanation on what is leading to the market share and how do you see this piece to grow on two-wheeler segment as a whole?

S. Sreenivasan — Chief Financial Officer

Raman, would like to take that question on claim ratio? And Tapan can give the answer on…

Ramandeep Singh Sahni — Chief Financial Officer, Bajaj Allianz General Insurance Co. Ltd

I’ll take it. Firstly, Happy Diwali to everybody. Sanketh, on your question on the OD loss ratios coming down, I think the issue was the aberration of quarter one. If you recall, in quarter one call also we had discussed that suddenly we are seeing a lot of OD claims coming up and we had explained that if you go in the pre-pandemic period, the OD loss ratios actually were always on the higher side in quarter one because of the holiday season. And this time, because it was the first holiday season after the pandemic, we knew that the amount of travel was much higher than anybody else. We saw number of cars being much higher on the road, the air tickets and all going up, that is the indication of how travel had moved up in the quarter one. And that’s why I say it was an aberration. So I think quarter two is more normalized now and that’s why you’re seeing such a big dip from quarter one to quarter two. That’s on the OD side.

On the two-wheeler side, I think what we mentioned in the past also that our market share used to be close to about 4% and the big handicap there was our OEM tie-ups with some of the bigger names, likes of TVS and Honda, Hero actually, not allowing us entry into the OEM program. And we had said that we were able to break ice with likes of Royal Enfield last year, and we had said in quarter one that TVS is on the cards. Happy to say that TVS has also now started on the OEM program. So I think the biggest shift has been that on the OEM tie-ups, we have been able to break ice with some of the larger brands, and that’s why you are seeing our market share, which used to be close to 4% on the new sales, it’s now moved up to closer to 6%. So that’s largely driving the change.

Sanketh Godha — Spark Capital Advisors — Analyst

Got it, sir. And last one on data keeping. Advanced premium number, if you can tell for the current quarter that would be useful?

Ramandeep Singh Sahni — Chief Financial Officer, Bajaj Allianz General Insurance Co. Ltd

Sorry, I lost you, can you just repeat the question?

Sanketh Godha — Spark Capital Advisors — Analyst

Advanced premium number in the balance sheet?

Ramandeep Singh Sahni — Chief Financial Officer, Bajaj Allianz General Insurance Co. Ltd

So advanced premium has also moved up given what I just said. If you recall last year September, it was closer to INR1,100 crores, now it’s at INR1,240 crores.

Sanketh Godha — Spark Capital Advisors — Analyst

Okay, sir. Thank you. That’s it from my side.

Operator

Thank you. The next question is from the line of Prakash Kapadia from Anived Portfolio Managers. Please go ahead.

Prakash Kapadia — Anived Portfolio Managers Pvt. Ltd — Analyst

Yeah. Couple of questions from my side. For BALIC, in terms of our channel mix, could you talk a bit more about the Direct channel? Because, I guess, it will be more urban than rural. So the contribution has been around 10%. So what’s our journey there and how do we upsell and what are we doing to increase the Direct channel mix on the BALIC side?

Tarun Chugh — Chief Executive Officer, Bajaj Allianz Life Insurance Co. Ltd

Thanks. BALIC, yes, it is 10% is BALIC Direct as we call it. Largely your assessment is appropriate that a significant contribution of the BD channel comes in from the top cities. In terms of what this channel does, it basically upsells to our existing customers who are orphaned because they have been — the agents may have — not be part of the Group in any form now. This has been the core modus operandi of this channel on upselling to existing customers. The way we are now working on it is sharper data analytics and sharper profiling and sharper product pitches. We are also trying to work with affinity groups. We’ve recently set-up in the BD channel a defense vertical. The defense vertical has shown some remnants of positivity in the banking side, particularly a lot of banks have defense-focused businesses and there is a large presence of uncommissioned officers — non-commissioned officers in the defense business. Hence we ourselves have hired a team of about 150 people who are now upselling to these affinity channels. If this experiment works well, we will be expanding further. In addition to this, we are moving to a light touch hub-and-spoke model where we are increasing our presence in smaller cities, wherever there is good quality data available from our past agency channels.

Prakash Kapadia — Anived Portfolio Managers Pvt. Ltd — Analyst

Okay. And typically what [Speech Overlap]

S. Sreenivasan — Chief Financial Officer

I think, overall, I think both our businesses, the B2C channel, it is not our intention that they will replace a distributed business. It is an alternate channel, it is proprietary, and as we grow that within the overall system, we will have better control on the overall distribution and provides with diversification and balance. So it is a calibrated approach. And if you can see, in BALIC, clearly 10% is a significant number given that four years ago we did hardly — had anything on BALIC Direct. And this is again part of our strategy to diversify our distribution mix.

Prakash Kapadia — Anived Portfolio Managers Pvt. Ltd — Analyst

Got it. And typically what would be — the product migration from a customer upsell perspective, it starts with what product and what’s the timeline to upsell? Because, I guess, this would be largely urban-centric and urban is doing fairly well. So I would guess this should have done better than what I think we’ve been reporting this.

S. Sreenivasan — Chief Financial Officer

I will take that question, Tarun. I think this is a bit too detailed. Clearly, I think Life Insurance is a business of savings and anybody who brought a product from us definitely has future savings as well. And that is the game we’re playing. And that we do across all channels, of course, but I think Direct has a better control on what they do because of the analytics and the kind of customer segment they are targeting. So that will continue. And as long as savings in India grows in Life Insurance, we will always have the opportunity to upsell because the same customer continues saving. I mean, that’s the basic principle behind which we are driving this.

Prakash Kapadia — Anived Portfolio Managers Pvt. Ltd — Analyst

Understood. And on BAGIC, you did mention about the competitive intensity being high on the motor OD side. So when does this settle? Because capital availability these days doesn’t seem to be a concern. So how and when does the OD side, at least, we see normalcy returning in terms of pricing, which can make us take better pricing products or risk-reward is more favorable? Because if motor doesn’t grow, which is a large segment, the overall GDPI could remain muted in the coming quarters.

S. Sreenivasan — Chief Financial Officer

I think one of the ways to look at it is, obviously, we are not expecting, or we cannot control what others do, if they want to burn capital and sell at a low price. So the question is, within that I think we are growing reasonably well, we are getting that type of business that we want, and it’s all a question of getting good quality business within the market. If prices continue to crash, there’ll be less if a good quality business available, and this is why if you see our bancassurance it’s already talked about in the GI space, we always face questions in the Life space. We have a formidable network of bancassurance growing well, we are growing above industry. It provides us a good mix of non-motor business. So composite GI business is all about diversification across lines, across segments of customers, and that is what we have been driving. And I think our formidable distribution across motor dealers, about agents, about — through brokers, through bancassurance, I think that — we will continue to expand that. And over that, I think we will get our fair share of whatever is going on in the market. Some business for some time is not profitable, being rather very cautious. When it becomes profitable again, we will re-enter that market. I think ultimately it’s a question of brand, customer service and balancing your portfolio in a way that you don’t lose your sight of what we want to achieve.

Prakash Kapadia — Anived Portfolio Managers Pvt. Ltd — Analyst

Right, understood. And lastly on the group health businesses, that has been growing. If I look at first half data, it’s grown, I think, pretty well in the first half. So has there been a price increase for us? What kind of loss ratios we target on the group health side, which is giving you comfort for such a growth? I think 29% is the H1 growth. So what is the range we look at and what is happening in that segment?

Tapan Singhel — Chief Executive Officer, Bajaj Allianz General Insurance Co. Ltd

Yes. I’ll take it. I think what’s happened is, if you recall, if you go few years back, the loss ratios for this segment have been on the higher side. And as we had indicated at that point of time, we will — we said that we will exit these businesses except to the extent that it made commercial sense for us. And in the past few years, be the pandemic, we had actually degrown these businesses, because like everybody else in the market, this segment was bleeding. I think there have been two changes post the pandemic; one is, obviously, the repricing, given what happened during the pandemic for obvious reasons, there was a significant amount of repricing. And the second piece was also the coverages have changed significantly. Most of the people realize that the coverages were not sufficient because the kind of money which got paid out on the health piece to the employees was far lesser than what the requirement was, and there has been a significant amount of change in the coverage. So both of these have led to a growth in this segment.

On your point on loss ratios, like we said earlier, we said we will write businesses to the extent they make commercial sense. So, I’ll just confirm that the combined ratios for this line of business has been sub-100%, and we are happy to grow this business because of that reason.

S. Sreenivasan — Chief Financial Officer

Just to add to that, I think we are neither aggressive nor conservative on this. These are corporate deals and we pick up if the economic terms at which we quote we get the business. And within that, we are able to grow the business because of the strength of our service, because it’s a very service-intensive business as well, because it’s an employer-employee business, decisions are taken by HR departments of companies as well. And I think, we are quite happy to be where we are, and also gives us paying strength with the hospitals because of the volume. So I think overall strategically it makes good sense for us. And tactically, the growth rates may vary depending on the deals you gather and the deals you want to write. And this is where our underwriting strength really comes to the fore.

Prakash Kapadia — Anived Portfolio Managers Pvt. Ltd — Analyst

Understood, understood. That’s helpful. Thank you.

Operator

Thank you. The next question is from the line of Bhuvnesh Garg from Investec Capital. Please go ahead.

Bhuvnesh Garg — Investec — Analyst

Yeah. Hello, sir. Thank you for the opportunity. My questions are on use-based health and motor products, like how do you view these products in terms of customer demand, growth potential and profitability?

Secondly, what is our strategy in these products? Any pipeline of launching these products?

And thirdly, what kind of tax core partnership we are developing to operate these products? These are my three questions.

S. Sreenivasan — Chief Financial Officer

Raman, Tapan?

Ramandeep Singh Sahni — Chief Financial Officer, Bajaj Allianz General Insurance Co. Ltd

Sorry, I didn’t understand. It is for which product did you mention?

Bhuvnesh Garg — Investec — Analyst

Recently launched, how do you drive or — those motor products and health products?

Ramandeep Singh Sahni — Chief Financial Officer, Bajaj Allianz General Insurance Co. Ltd

Okay. Understood, understood. Yeah. So I think for us, these products are in the pipeline. We should launch them very soon. I think if you look at it from a customer perspective, it’s a great thing to happen because — so there are two types of products, right? One is a pay-per-use and the other one is taking the gamut of products under one umbrella. If you have multiple cars, clubbing all of them together and taking one policy. I think the latter one is where we will see a good amount of traction, because it adds to a lot of convenience from a customers’ perspective on one side. Plus, obviously, from an insurer’s perspective also it will lead to giving a better pricing for the customer. So I think it will be a win-win for both. Now, that’s how we are looking at it. Now, obviously, proof of the pudding is to be seen only once the product is launched. But we are pretty bullish on it from a customer and a Company perspective because once you start aggregating, we’ll have one view of the customer’s portfolio also, at least on the motor front. We’re also working at some structuring to see if we can do the same across the product lines, not only in the few motor cars of the customer, but the entire portfolio. But I think it’s at a very early stage now. Maybe in a quarter or two, you will start seeing the outcomes of these.

S. Sreenivasan — Chief Financial Officer

Just to add to that, I think, globally also I think pay-per-use is not something new. But there will be an additional option to the customer for those who feel they need it, but there is no evidence to show that the core indemnity products of motor, health, home, have been replaced by this product which you take when you want kind of thing. These are good for customer acquisition. They may add occasionally to the bottom line as well. But the long-term journey of insurance is always with long-term indemnity products.

Ramandeep Singh Sahni — Chief Financial Officer, Bajaj Allianz General Insurance Co. Ltd

So just to add, this pay-per-use was something which we also did add up as a pilot in the past, while some traction was there but nothing meaningful. That’s why I said that the latter will be where we will see more traction. Pay-per-use, like Sreeni said, globally also it’s there as a good to have, not so much traction seen globally.

Bhuvnesh Garg — Investec — Analyst

Sure, sir. Thank you.

Operator

This is the operator, Mr. Garg, does that answer your question?

Bhuvnesh Garg — Investec — Analyst

Yes, yes. Answered. Thank you.

Operator

Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Anuj Narula for closing comments.

Anuj Narula — JM Financial Institutional Securities Limited — Analyst

Thank you. On behalf of JM Financial, I would like to thank Sreeni sir, the senior management team of the insurance businesses and all participants who have joined us on the call today. Thank you and have a good day.

S. Sreenivasan — Chief Financial Officer

Thank you. Have a good day, everyone. Thank you.

Tapan Singhel — Chief Executive Officer, Bajaj Allianz General Insurance Co. Ltd

Thank you.

Operator

[Operator Closing Remarks]